Corporation Tax

Non-resident landlords ― transitional rules for companies from April 2020

Produced by Tolley
  • 19 Oct 2021 22:54

The following Corporation Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Non-resident landlords ― transitional rules for companies from April 2020
  • Non-resident corporate landlords ― the move to corporation tax
  • Non-resident corporate landlords ― transitional rules from 6 April 2020
  • Duty to notify chargeability to corporation tax
  • Property rental losses
  • Capital allowances
  • Foreign permanent establishments (PE) of non-UK resident companies
  • Derivatives and the disregard regulations
  • Quarterly instalments
  • Administrative matters

Non-resident landlords ― transitional rulesfor companies from April 2020

Prior to 6 April 2020, all non-resident landlords (NRL) were subject to income tax on UK property rental income. Non-resident companies were subject to a flat rate of income tax (20%) on the rental income. Depending on the level of the income, non-resident individuals were subject to tax at the default income tax rates of 20%, 40% or 45%.

From 6 April 2020, non-UK resident companies are chargeable to corporation tax rather than to income tax on profits of a UK property business and ‘other UK property income’. There are transitional rulesthat apply for accounting periods that straddle this commencement date. These are discussed below. The position for NRL that are not companies is unchanged.

Non-resident landlords are subject to the provisions of the non-resident landlords scheme (NRLS). The NRLS continues to apply to non-UK resident company landlords from 6 April 2020. Any income tax deducted under the NRLS can be offset against the corporation tax liability of the company in respect of that rental income. See the Non-resident landlords scheme (NRLS) guidance note for further details.

In addition to the taxation of the rental income, non-resident investors holding UK real estate will also need to consider the tax consequences of any eventual disposal of the property. From 6 April 2019, all disposals of UK property by non-residents (commercial or residential) are within the scope of UK tax. This includes direct disposals of UK commercial and residential land, as well as disposals of interests in certain entities which derive 75% or more of their gross asset value from UK land. See the Overview of the ruleson disposals of interests in UK land by non-residents guidance note for further details.

This guidance note considers the transitional rulesthat apply from 6 April 2020 to companies that are non-resident landlords. For a discussion of some of the basic planning issues relevant to NRL including in particular the choice

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